On Our Radar

On Our Radar

Hulu, TV Networks to Change Model of Free Streaming

Viewers who stream network TV shows may soon discover the free ride is not so free.

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Hulu, which attracted 31 million unique users in March under a free-for-all model, is taking its first steps to change to a model where viewers will have to prove they are a pay-TV customer to watch their favorite shows, according to sources.

In fact, the move by Hulu toward the new model -- called authentication because viewers would have to log in with their cable or satellite TV account number -- was behind the move last week by Providence Equity Partners to cash out of Hulu after five years, these sources said.

And it's not just Hulu making it tougher for cable-cutters to stream shows and other content.

Fox, owned by News Corp., which also owns the New York Post, the FOX Business Network, and NewsCore, is expected to begin talks soon with Comcast on a TV Everywhere deal that will require authentication. Plus, Philadelphia-based Comcast is expected to switch to an authentication model for this summer's Olympic Games.

The move toward authentication is fueled by cable companies and networks looking to protect and profit from their content.

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The effort comes as entertainment companies continue to face drastic shifts in home viewing habits. Overall spending on home entertainment edged up 2.5 percent to $4.45 billion in the first quarter as a surge in digital streaming, which rose more than fivefold to $549 million, offset a continuing collapse in video rentals, according to Digital Entertainment Group.

Hulu, owned by News Corp., Disney, Comcast and Providence, could see its March audience, as measured by ComScore, shrink after authentication. Hulu racked up some $420 million in ad revenue last year and is expected to do well in this year's ad negotiations.

But the move toward authentication, which could take years to complete, will make cable companies happy because it could slow cord-cutting by making cable subscribing more attractive.